Unlocking Growth in a Decreasing Interest Rate Environment : Preferred Shares

In the dynamic world of investment, financial advisors continually seek strategies that not only bolster portfolio diversification but also optimize tax efficiency and yield potential for their clients. With the forecasted shift toward reducing interest rates, it’s crucial to identify investment vehicles that are poised for resilience and growth. This is where the Louisbourg Investments Preferred Share Fund shines as a standout choice, offering a unique blend of advantages that set it apart in the financial marketplace.?

What are Preferred Shares???

Preferred shares represent a category of ownership in a corporation with a fixed dividend, standing above common stock in the event of liquidation but typically without the voting rights. This hybrid nature combines the income features of bonds with the growth potential of equities, making them an attractive option for investors seeking stability and performance. As interest rates begin their downward trajectory, preferred shares are expected to shine, offering several advantages over traditional bonds.?

Navigating a Reducing Interest Rate Environment?

In periods of declining interest rates, both bonds and preferred shares can become increasingly attractive to investors for several reasons:?

1. Favourable Conditions for Bonds: Typically, bond prices rise as interest rates drop, making them a classic choice for investors seeking to capitalize on such environments. They offer predictable returns and a measure of safety, attributes that are highly valued in uncertain economic times.?
2. The Appeal of Preferred Shares: Similarly, preferred shares can also benefit from reducing interest rates. Given their fixed dividend payments, they can become more attractive relative to the lower yields of newly issued bonds. This makes them a compelling option for income-seeking investors, blending the benefits of equity and debt instruments.?
3. Tax Efficiency: For non-registered investment accounts, the Canadian tax treatment of dividends from preferred shares can be more favourable than the interest income from bonds, providing a significant advantage in after-tax income.?

Why you Should Consider this Fund??

Comprehensive Diversification: Including this fund in a client’s investment mix introduces an additional layer of diversification. It complements traditional investments, helping to balance the overall risk and return profile of a portfolio.?

Optimized for Economic Shifts: With expectations of reducing interest rates, the fund is particularly well suited to capitalize on the resulting investment opportunities. It combines the potential for income generation with a positive relationship with interest rates in a decreasing rate environment making it an attractive option for proactive investment strategies.?

Enhanced Tax Efficiency: The tax treatment of dividends from preferred shares also offers advantages in non-registered accounts compared to bonds. Since the income is taxed as dividends rather than as interest income, it is a great tool for financial advisors focused on maximizing their clients’ after-tax returns.?

For more on the Louisbourg Investments Preferred Share Fund, click here.??

In conclusion, if you are seeking to differentiate your client portfolios with an investment that offers a blend of stability, growth potential and tax efficiency, the Louisbourg Investments Preferred Share Fund is a premier choice. Exclusive to Assumption Life, this fund not only stands out for its unique market position but also for its strategic fit within a diversified investment strategy tailored for the evolving economic landscape.?

In an era where unique value and strategic foresight are paramount, this fund offers a pathway to both. We invite you to explore this exclusive offering, leveraging its distinct advantages to enhance your client portfolios with confidence and vision.?

If you would like more information on how to leverage the Preferred Share Fund within your clients’ investment portfolios, please reach out to me.?

Rick Gallant (Director of Business Development - Investments)

Assumption Life